U.K. Seeks to Extend Exemption From Tax for Artists’ Heirs

Citing the global economic crisis, the British government announced it intends to extend its current exemption from a tax on the resale of works by deceased artists for an additional two years, until 2012. The resale tax currently in effect in the U.K. applies only to sales of works by living artists.

NEW YORK—Citing the global economic crisis, the British government announced it intends to extend its current exemption from a tax on the resale of works by deceased artists for an additional two years, until 2012. The resale tax currently in effect in the U.K. applies only to sales of works by living artists.

In a Dec. 18 letter to Charlie McCreevy, the European commissioner for internal market and services, John Denham, secretary of state for innovation, universities and skills, explained the government’s rationale: “The current economic climate could only but affect the U.K. market’s ability to cope with the application of artist’s resale right to the works of deceased artists.” Denham said application of the tax to sales of works by deceased artists would “mean a four-fold increase in the number of transactions subject to resale right. … It is doubtful whether the U.K. art market could deal with these changes during such a difficult economic climate.”

In 2006, despite considerable resistance from art dealers and auction houses, the U.K. fell into line with most of the other countries in the European Union (EU) and began charging the tax known as droit de suite, or artists’ resale royalty fees, on the resale of works by living artists.

The droit de suite entitles artists and other authors of original works of art to a royalty each time one of their works is resold in a transaction involving an art market professional. The EU directive was passed by a majority of the European Parliament on Oct. 13, 2001, as part of the harmonization of tax laws among EU member states. Currently the maximum amount of resale royalties payable is €12,500, or $17,620, and the tax applies to sales valued at €1,000 or more.

Countries that did not already have the artists’ resale right in effect when the directive was passed in 2001 were allowed the option of waiting until Jan. 1, 2010, with the option to extend the deadline until Jan. 1, 2012, to allow those countries “to adapt gradually to the resale right system while maintaining their economic viability.”

In his letter to McCreevy, Denham said applying the additional tax could mean that art sales would be diverted “outside the EU to countries without the resale right. … If the U.K. market shrinks then the U.K. art trade will buy and sell fewer works of art from artists, which will make the financial situation of living artists even more difficult.”

Earlier this year French president Nicolas Sarkozy attempted to give his country’s art market a lift by seeking to partially eliminate the droit de suite that French art owners must pay when they choose to resell an artwork. Sarkozy reportedly wrote to European Commission president José Manuel Barroso, calling for the ARR to be limited to works by living artists indefinitely throughout the European Union (ANL, 11/11/08).

The London-based Design and Artists Copyright Society (DACS), which represents 36,000 fine artists, photographers, illustrators and animators and their heirs, and manages the artist’s resale right on behalf of artists, is strongly opposed to the extension. In a report submitted to the government last September, the DACS states that “there is no justification, economic or moral,” for extending the exemption, adding that critics of the droit de suite “have produced no compelling evidence … as to how the U.K. art market has been damaged” by implementation of the tax. The DACS report argues that the amount of the tax is so small compared with the prices of sales that “Artist’s Resale Right, whether confined to living artists or extended to the beneficiaries of deceased artists, could not possibly influence the size or operation of the U.K. market, up or down.”